The Swiss National Bank said Thursday it would impose negative interest rates on cash held by other banks at the central bank. ReutersZURICH—Switzerland’s central bank Thursday said it would introduce negative interest rates to cool the strength of the Swiss franc, a move that comes as central banks across Europe scramble to protect their economies from the threat of falling consumer prices.With its move, the Swiss central bank joined others in Denmark and the eurozone in enacting a policy aimed at discouraging banks from parking excess funds with the central bank. It highlights the divergent paths being taken by policy makers in developed economies as their economies recover at varying speeds.In the U.S., the Federal Reserve is expected to start raising rates in the middle of 2015, while the Bank of England could follow suit later in the year. By contrast, central banks across much of the European continent may keep easy-money policies in place for years as their interconnected economies force officials to one-up each other on aggressive policy moves.“Divergent monetary policies were very much a prospect already, but the latest events have been exacerbating this,” said Jonathan Loynes, economist at consultancy Capital Economics.Beginning Jan. 22, the Swiss National Bank will charge banks 0.25% to deposit overnight funds with it, it said in a statement. The move will push the three-month Swiss franc Libor rate, currently in a range between 0.0% and 0.25%, into negative territory. The SNB’s decision comes after months of pressure on the franc, which has strengthened to near 1.20 a euro, a level the central bank has pledged for the past three years to defend. A strong franc, which has benefited from haven buying and weakness in the eurozone economies, raises the risk of imported deflation and creates headwinds for the country’s exporters, many of whom depend on the European Union as a key market. “The introduction of negative interest rates makes it less attractive to hold Swiss franc investments,” the SNB said in a statement, explaining the reasons for the policy. It added that it will continue to defend the 1.20 franc-a-euro level and “is prepared to purchase foreign currency in unlimited quantities and to take further measures, if required.”The Swiss franc immediately dropped on the news, falling to 1.2098 a euro, its lowest level since October. The decision, made before the stock market opened, also buoyed Swiss shares with the benchmark SMI trading 1.3% higher.In June, the European Central Bankintroduced negative interest rates on deposits with it, a move designed to encourage banks to lend rather than park money.The ECB is expected by analysts to step up its stimulus efforts as soon as its next meeting on Jan. 22—the same day the SNB policy comes into force—by announcing a large-scale asset-purchase program that includes government bonds.

The SNB said the timing of its negative rate was unrelated to the ECB meeting and instead fulfills its obligation to give banks 30-days’ notice of its rate change.The central bank of Denmark, which isn’t part of the eurozone, has also used negative interest rates. “The SNB has bowed to the inevitable,” said Kit Juckes, macro strategist at Société Générale.“If 2015 brings more ECB easing and the start of Fed tightening, it is going to be difficult to hold it and this may not be the last step they take.”Europe’s challenge is complicated by tightly linked economies that operate under multiple currency and monetary policy regimes, with the ECB as the driving force, given its size. If the ECB takes aggressive stimulus measures, as it did in September and is expected to do early next year, the response is typically a weaker euro against other European currencies. This damages exports from Switzerland, Sweden and other European economies that don’t use the euro and puts more downward pressure on consumer prices. The response of many of these central banks has been to loosen their own monetary policies. Denmark’s most recent deposit rate cut came hours after the ECB lowered its rate again in September. Sweden’s central bank cut its benchmark lending rate to zero in October.The SNB’s move will widen the range for three-month Swiss franc Libor, a key interest rate, to minus 0.75% to 0.25%.The move is the first change to the SNB’s three-year policy of defending its minimum exchange rate through the purchase of euros, a practice which has seen its foreign currency reserves swell to more than 460 billion Swiss francs ($473 billion).The SNB has intervened in currency markets in recent days, the bank’s chairman Thomas Jordan told reporters Thursday.The SNB has insisted in recent months that it wouldn’t exclude the use of negative rates to discourage investor buying of the franc, but some analysts expected the central bank to wait for the next move from the ECB. The SNB said the 0.25% fee will be charged on Swiss franc sight deposit balances that exceed a certain threshold, which will vary with account holders, but will be at least 10 million francs.—Chiara Albanese in London contributed to this article.

Market Talk

SNB Negative Rate Timing Bold, Says IG The Swiss National Bank’s decision to impose negative rates was anticipated, but it wasn’t thought likely to do it this soon, according to IG Bank. “The SNB implemented this tool well before the next European Central Bank meeting, where a proper QE will most probably be announced,” says analyst Laurent Bakhtiari. “The SNB played the first move very well, and from now on it will have to stay one step ahead of the ECB if they want to defend the 1.20 minimum rate, and some other unconventional measures should be expected in the future,” he adds. (neil.maclucas@dowjones.com)Swiss Bank Move Won’t Hit Property Sector says SNB Jordan The Swiss National Bank’s imposition of negative rates on bank deposits shouldn’t affect the country’s buoyant property market, according to its head Thomas Jordan. The SNB has alluded repeatedly in recent years to the “imbalances” developing in the market and together with the government has twice stepped in to force banks to raise the amount of capital they must set aside against the mortgages they extend. Mr. Jordan today however stressed that mortgage banks need to be “very cautious” when lending money in the current market environment. (neil.maclucas@wsj.com) Negative Rates Might Be A Waste Of Time says Citi Historical evidence suggests negative rates might be a waste of time, strategists at Citigroup warn after the Swiss National Bank surprised markets by cutting rates into negative Thursday. SNB’s move sparked general demand for the dollar, while having a short-term impact on the Swiss franc exchange rate. Moreover, strategist Josh O’Byrne points out that while SNB caught the market offside, limited impact on domestic banks could dampen the move. (chiara.albanese@wsj.com) Market Talk is a stream of real-time news and market analysis that’s available on Dow Jones Newswires

The collapse in the rouble is caused by Vladimir Putin’s belligerence, greed and paranoia

Dec 20th 2014.

VLADIMIR PUTIN has successfully suppressed dissent, squeezed out opposition and clamped down on the media, but he has not been able to control global financial markets. In recent days the rouble has collapsed; it has lost almost 40% of its value over three weeks. This is the biggest crisis of Mr Putin’s reign—and it is entirely his fault.Mr Putin will no doubt blame all the usual suspects—Western speculators who bet against his currency, Western imperialists who imposed sanctions on his economy, Western economists who failed to forecast that the oil price (down by half over six months) would fall as far as it has and, of course, Western newspapers that told him that his policies would lead to disaster. But the crisis is the inevitable consequence of Putinism—of aggression abroad and a corrupt-and-control economy at home.

Kleptocracy and its consequences

The sanctions were imposed by the West because of his conduct in the Ukraine, where he has, among many things, seized territory, engineered a war and refused to investigate the shooting down of a civilian airliner. Meanwhile, he has failed to reform Russia’s economy, leaving it dependent on the energy industry that he has carved up among his friends. Had he chosen to build an economy based on the rule of law and competition rather than patronage and corruption, things would have looked very different.In the short term, there is not a great deal that Mr Putin can do to get his country out of the mess that he has made. A huge interest-rate rise this week, following previous large increases, has not worked. Capital controls are not the answer. They can sometimes be effectively employed against short-term speculation, but in this case investors are rightly worried about an economy that is so reliant on one sector. Anyway, in such a lawless place, capital controls would be porous and could trigger runs on the Banks which the country could ill afford. Russia still has reserves of $370 billion, but it also has foreign-currency debts of more than $600 billion.To improve the long-term prospects of an economy that is heading into a deep recession, two bigger changes are needed. The first is that Russia should pull back from eastern Ukraine and seek some accommodation with the government in Kiev and the West that could lead to the lifting of sanctions. The second is a change to the country’s economic model. Mr Putin needs to take advantage of the fall in the value of the currency to diversify away from excess dependence on oil and gas, which make up two-thirds of exports; to improve the competitiveness of manufacturing and high-tech industry; to strengthen the rule of law; and to clean up corruption. To implement all this he should replace his pliant prime minister (and previous president), Dmitry Medvedev, with a credible economist such as Alexei Kudrin, who was a respected finance minister for 11 years. His oligarch chums might not like this, but Russians would be better off.Sadly, none of this is likely to happen. Mr Putin will probably double down, railing against Western iniquity, stifling all dissent at home, destabilising Ukraine still more and interfering further in other neighbouring countries. And he will pursue a course of growing autarky, severing as many of Russia’s economic and financial links to the West as he can.A brazenly nationalist course will impoverish Russia further, making it impossible for Mr Putin to keep delivering rising living standards. He will gamble that the Russian people are foolish enough to trade prosperity for nationalistic fervour. This newspaper hopes he is wrong.

If you know the other and know yourself, you need not fear the result of a hundred battles.

Sun Tzu

We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.